Winning Streak

January 31, 1994

THE United States economy seems to be supplying a string of good news these days.

At the weekend, the US Commerce Department reported a strong economic showing for the last three months of 1993. The gross domestic product, the measure of goods and services produced, grew at an annual rate of 5.9 percent after inflation. If that figure holds despite revisions, inflation-adjusted growth for 1993 will have reached 2.9 percent, a stronger showing than '92. At the same time, inflation remains tame. Using the GDP's price index, a broader measure of inflation than the consumer price index, the inflation rate reached only 2.2 percent during the fourth quarter and 2.9 percent for the year.

Cold weather, the earthquake in southern California, and tax increases built into the federal budget to help reduce the deficit are likely to moderate the pace early this year. Even so, growth in the 3 to 4 percent range would be respectable. And, as the experience from Hurricane Andrew shows, nature's impact on local economies can be reversed when reconstruction begins.

The economy's performance has taken sizable bites out of federal budget-deficit estimates. The deficit hit $255 billion at the end of fiscal 1993 and now is anticipated to reach $220 billion this year. Economists put the deficit at the end of fiscal 1995 at between $165 billion and $190 billion. Either way, the government's reduced borrowing needs - plus low inflation - should help keep the pressure off of interest rates.

With performance like this, there is sufficient credit to go around: to the Federal Reserve Board, which has held down interest rates (remember Fed chairman Alan Greenspan in the signal next-to-Hillary seat during President Clinton's economic address this time last year?); to the president, who has projected an activist image on economic issues; and to consumers, whose increasing confidence in their prospects has prompted them to begin buying postponed purchases.

The challenge now will be to sustain the progress in ways that include more of the 6.4 percent of the work force that remains without jobs.